Importance Question of Conceptual Foundation of Cost And Management Accounting | BBS 2nd Year Notes

Brief Answer Question (2 Marks)

1. What are two limitations of Cost Accounting?

Ans. Any two limitations of Cost Accounting are:

• Not 100% Accurate: Cost accounting is based on estimates and assumptions like overhead absorption rate, so it may not reflect the exact cost of a product or service.
• Costly & time consuming: Setting up and maintaining a cost accounting system requires extra time, money, and skilled personnel, which may not be practical for small business.

2. Write any two objectives of cost accounting?

Ans. Two objectives of Cost Accounting:

1. Determine Cost of Products/Services – To calculate the actual cost of producing goods or services, helping in pricing and cost control.

2. Assist in Decision-Making – To provide detailed cost data that helps management in planning, budgeting, and taking smart financial decisions.

3. Write down any two limitations of financial accounting?

Ans. Two limitations of Financial Accounting:

1. Historical Nature – It records only past transactions, so it doesn’t help much in future planning or decision-making.

2. Ignores Non-Monetary Factors – It doesn't record things like employee skills, customer satisfaction, or brand value even though they affect business performance.

4. State any two importance of cost accounting.

Ans. Two Importance of Cost Accounting:

1. Helps in Cost Control – It tracks expenses and identifies wastage, helping businesses reduce unnecessary costs and improve efficiency.

2. Supports Decision Making – It provides detailed cost data that helps management in budgeting, pricing, and strategic planning.

5. Write any two advantages of Cost Accounting?

Ans. two advantages of Cost Accounting:

1. Improves Efficiency – By analyzing costs, it helps in identifying areas where resources are wasted and boosts overall productivity.

2. Aids in Fixing Prices – It gives accurate cost data which helps in setting fair and profitable selling prices.

6. State any two objectives of management accounting?

Ans. Two Objectives of Management Accounting:

1. Assist in Decision Making – It provides relevant financial and non-financial data to help management make informed and strategic decisions.

2. Planning and Control – It helps in setting budgets, forecasting future trends, and monitoring performance to keep the business on track.

7. Mention any two advantages of management accounting?

Ans. Two Advantages of Management Accounting:

1. Better Decision Making – It gives real-time data and analysis, helping managers take smart and timely decisions.

2. Improves Business Efficiency – By identifying weak areas and controlling costs, it helps boost overall performance and productivity.